Lifeward Ltd (LFWD) 2021 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Q1 2021 ReWalk Robotics Limited Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Ori Gon. Please go ahead.

Thank you, Misty. Good morning, and welcome to ReWalk Robotics First Quarter 2021 Earnings Call. This is Ori Gon, ReWalk's Chief Financial Officer, and with me on today's call is Larry Jasinski, our Chief Executive Officer.

This morning, the company issued a press release detailing financial results for the 3 months ended March 31, 2021. This press release and a webcast of this call can be accessed through the Investor Relations section of the ReWalk website at www.rewalk.com.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.

These forward-looking statements are based on information available to ReWalk's management as of today and involve risks and uncertainties, include those noted in this morning's press release and ReWalk's filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in forward-looking statements. ReWalk specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.

A telephone replay of the call will be available shortly after completion of this call. You will find the dial-in information in today's press release. The outside webcast will be available on the company's website. For the benefit of those who may be listening to the replay or archive webcast, this call was held and recorded on May 11, 2021. Since then, ReWalk may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings.

And with that, I'll turn the call over to ReWalk's CEO, Larry Jasinski. Larry?

All right. Thank you very much. Good morning, everyone. I am pleased to report that we had a solid Q1 and are on track for our goals in 2021. Now Q1 was the beginning of a transition from COVID limitations to more normal operations as our customer base is making progress towards returning to training and into the clinics.

Q1 sales were $1.316 million compared to $0.760 million in the prior year quarter and $1.2 million in the trailing quarter. For our core product offering, the ReWalk 6.0, we expect continued progress with our current base of target candidates which is at 168 qualified individuals at this time. 82 of those are in Germany, where we have the strongest coverage position as we emerge from COVID, 56 are in the U.S., which consist primarily of BA and workmen's comp individuals. 30 are in the U.K. and within their litigation system.

As U.S. progress occurs with CMS, we will seek to move larger numbers of Medicare/Medicaid individuals into our qualified pipeline. This current base of potential ReWalkers combined with our full direct sales force in these 3 geographies and the expected reopening for access to these training centers provides us with a sufficient base to meet our year-over-year growth goals.

For the ReStore product offering, the reopening has allowed the expansion of data generation and reentry into target accounts. We have worked with several of our KOLs to develop a symposium for this year's ACRM conference, which examines the role of robotic systems like the ReStore Exo-suit in achieving the therapeutic goals of high-intensity gait training with patients post stroke. The reopening will allow reinitiating the clinical studies at Spaulding in Boston, the AbilityLab in Chicago and at Boston University.

Our parallel focus to building data is initiating placements and seeking subsequent contracts with national chains or accounts. We now have 7 clinics with 4 different national groups that are utilizing the ReStore device for broader use within their national programs. We are also advancing contract efforts with our MYOLYN offering and our MediTouch offer with the same chains and others.

Our expectations for year-over-year growth relies on ongoing and increasing access to our clinics and customer base, and all current trends in the U.S., U.K. and Germany support our expectation to meet our growth goals. All other financial metrics are also aligned with our planning. Our gross margin landed at 54%. Our operating expenses will be level in almost all efforts beyond sales commission and travel expenses. Our cash position at the end of the quarter was $67.4 million. The combination of growth, margin management and controlled expenses leaves us with a runway to achieve breakeven operations and to consider other opportunities to build our business.

At the start of the year, we identified several key milestones to watch in 2021 that will have an impact on our efforts to develop this new and emerging market. Here is a review of each. The first milestone. In the German Federal Social Court, which is the highest score for social jurisdiction in Germany, a ruling is expected to decide if an exoskeleton, which is an orthopedic aid that replaces the function of legs, enables independent walking and standing, whether it serves to directly compensate for disability. This case was filed in the local social court in May 2017 and the case was denied. It was appealed to the state social court, which overruled the local court and ruled that a ReWalk must be provided. It was then appealed by the payer to the highest social court in Germany, the Federal Court for a final ruling.

The court does not provide a specific guideline on timing for a ruling, but our best estimate is mid-2021. A positive ruling would have a significant impact on the landscape by all payers in Germany.

Our second milestone, expansion of contracts in Germany, they remain highly active with 2 of the remaining large chains, but final contracts are more likely to be held until the court decision is issued.

Third milestone. In the U.S., the successful HCPCS code issuance is actively being followed with multiple activities around pricing, categorization of the exoskeletons and regarding coverage policies with contracted planned in coordination with CMS. This time line has some uncertainty, but we are pleased with the progress that has been incurred.

And the fourth milestone. In the U.K., the utilization of the ReStore system in NHS evaluation centers is scheduled with patients as they return to the clinics on May 17 with a broader opening in June.

I'd now like to turn the call back over to Ori for a review of the financial details. Ori?

Thanks, Larry. As mentioned, our first quarter revenue for 2021 closed at $1.3 million compared to $760,000 in Q1 2020 and $1.2 million in the previous quarter. The increase compared to last year was due to increased number of ReWalk Personal 6.0 units sold in Germany and the U.S.

Regarding our insurance progress. This quarter, we had a total of 6 new insurance decisions to place a device for a new rental or a direct purchase and 7 conversions of previously rented devices. Our current pipeline of active rentals consist of 18 personal 6.0 devices and 2 ReStore rentals.

As Larry mentioned, we have additional active programs with different U.S. accounts currently analyzing the ReStore device during their stroke in [gait] therapy.

Turning into our gross margins. In the first quarter of 2021, our gross margin was 54% compared to 49% in the prior year quarter. The increase is mainly due to our higher number of units sold with offset due to higher inventory write-off and policies for service and warranty.

Regarding the operating expenses, our Q1 2021 operating expenses [landed into] $3.7 million compared to $4 million in the prior year quarter. This decrease is mainly due to lower R&D spend as we have implemented cost reduction efforts in the beginning of last year with the major ReStore project completed and to adjust due to the COVID-19 impact.

Looking at our operating expenses compared to the previous quarter, we see that the main change is in our sales and marketing activity, which is almost entirely due to our PPP loan forgiveness which was booked as a reduction of sales and marketing in the last quarter.

To recap the quarterly results, our net loss for the first quarter of 2021 was $3.1 million, compared to a net loss of $3.8 million in the first quarter of 2020. This is due to our increased revenue and reduced spend.

Our non-GAAP net loss for the first quarter of 2021 was $2.8 million compared to $3.6 million in the first quarter of 2020. We ended the quarter with $67.4 million in cash, which includes our -- $40 million from our February equity fund raise and $13.8 million received from warrant exercises.

With that, I'd like to turn the call back to Larry for some final remarks. Larry?

Thank you, Ori. I'd like to further discuss our status regarding the 4 major goals we defined at the start of the year within the context of our overarching business strategy. We've laid out the baseline for year-over-year growth with our existing products, which builds on coverage, market access, a fully active sales team and expansion of data. We also anticipate our path to be in a sustainable and profitable independent operating entity may require a combination of growth in the base products and successful internal and external development programs.

Technologies we own and could gain access to, combined with our current infrastructure and our current financial position is an ideal mix to achieve these goals. While most focus is on short-term commercial operations, we have active efforts pursuing new indications for our soft exo-suit offerings paired with a parallel payer strategy. We will also examine new opportunities that fit our operating goals that could benefit in partnership with our organization. Thank you very much for your time and interest today.

I'd like to turn the call over to questions at this stage. Operator, if you could please go ahead with the instructions.

(Operator Instructions) Your first question is from Sean Kang with H.C. Wainwright.

So my first question is regarding insurance discussion in the state. So what is the progress you've made regarding the payer discussion after you got the CMS? And is there anything else like in terms of clinical data to kick in to help the discussion?

Yes. This is Larry. Thank you, Sean. Basically, we have a lot of interaction occurring with CMS, which is we find incredibly valuable in giving us guidance to answer the open elements to allow contracting, specifically establishing pricing, establishing a final categorization and establishing a path to contracts. So these 3 pathways are all underway, and they're at a stage right now where they're primarily interaction with segments within CMS. And with some patients. So we are in process, I guess, there's no specific short-term milestone, but really good interaction moving it forward.

Relative to data, we have a very solid block of data that we believe will support coverage exactly as it is currently set up. That has been successful in Germany and has gotten us through the HCPCS code issuance. But we do have additional data, and we've outlined some of it in prior calls. The VA Coop Study, which was a 160 patient randomized trial, I've discussed in the past. We have no control over when they publish it, but they will publish that sometime in the coming months or so depending on the VA.

Secondarily, within our control is we have established a study looking at economic results for a patient who's been able to have the ability to walk again compared to a patient or that patient prior to their walking and what effect it had on their health. So we will have more data on a consistent basis around ReWalk and obviously, with the ReStore as well. But we don't believe they're absolutely necessary for coverage, but we think they're very helpful.

I see. That's helpful. One more question from me is, so from the press release I saw that your cash position -- you said your cash position could allow you to explore further opportunities for growth. Was it more like more a general statement? Or is there any specific potential product you have in mind?

We -- I'd split that into, internally, our success with the programs at Harvard University and the associated groups they work with, our products we would like to move forward with and bring to market. So part of that is development of internal technology that we own, specifically targeting home use of stroke, which is a large unmet need for a low-cost type system of that type. But also, we examine every possibility. We will also look at outside possibilities as a pathway if we find something attractive.

I see. So home use for stroke. So it has been basically a home use version of ReStore, I guess, right?

Well, conceptually the same, but the difference would be a much simpler, less expensive device that can be easily handled at home by an individual. ReStore product is designed specifically for the clinic, and it can help higher volumes of patients. You put in X number of patients per day. So it's used repeatedly and it has to be set up differently and is a lot different in terms of durability requirements. A home use product would be for a single individual at a much lower cost because you don't have to have the level of design for a clinic and clinical use. So it's a simplified version of it, but it is offering the one primary feature that the ReStore offers that no other product has been able to achieve and which seems to make a major difference in the success of regaining and relearning patterns, and that's propulsion or lifting the heel forward. That is the key feature of the Reboot program, as we call it, which is a significantly different product, but the same concept as ReStore.

Your next question is from Swayampakula with H.C. Wainwright.

This is RK from H.C. Wainwright. Certainly a very encouraging quarter and a good start for 2021. So thinking about your backlog, you stated you have 82 cases pending in Germany. And at the same time, you're also waiting for the Federal Court to issue its decision. How many of these 82 cases are actually entangled within that decision in the sense? Because you have had previously, I think, 3 or 4 insurance groups that had contacts with your folks, correct?

Right. Ori, do you want to pick up that one?

So RK, the question is how many of the 82 is subject to the social court case or is within a social court case?

Yes.

Okay. Let me pull it up. I believe it's in the neighborhood of 30 cases, but I want to verify that. So give me 1 minute. I'm just opening it up. So yes. It's 30 cases. 30 cases of the 82 are currently in social court, and they will be -- they will be affected by it at the end of the day.

Yes. Okay. Perfect. And then a similar question for the 56 ones in the U.S., too, because you potentially have some of these folks go through the VA system, which does not get impacted by the CMS or the HCPCS code. So I was just trying to figure out where you are with not only with the VA study. And also, I would think, potentially, the folks who are going through the VA system have a better chance to get through and acquire the product. Is that -- is my thinking correct? Or not so correct?

No. I think your thinking is correct, and it's similar to ours. The VA's national policy has provided these systems routinely to patients who qualify. So of those 56, the majority are VA, or we might have the specific number and I'd grab it quickly in a minute. But the key element is the VA is being open. They're running about -- depending on the region of the country. About 25% to 50% open. So we were sitting at 0 most of last year for this group. So we've made really good progress, particularly in the southeastern and central part of the United States. We're a little behind in the -- what we see in the western and northeastern part of the United States relative to the VA being as active. So that pipeline should open up, and those patients do have a coverage policy. So if we can get them trained, and they have a successful training, we can provide them systems.

Perfect. Certainly encouraged by the rest or getting relaunched. So should we think of ACRM conference being the place where you would potentially put all your energies into getting that relaunch start-up. And also, in the past 1 year, what have you kind of learned as you are getting prepared for this relaunch of the ReStore product.

First, our efforts and plans on relaunching are prior to that symposium, the ACRM conference is in September. And we think that's a very meaningful one because the data continues to be very positive and to have those discussions and presentations of further data, I think, are valuable for other sites. But we -- our main focus on our launch in the short-term has been with national accounts as we have evaluations now going on in some fairly large chains that if those evaluations go as we would expect, we can see expansion in those chains. So the launch is really already underway by virtue of the evaluations that have been started in at least 4 major groups, 3 in the U.S., 1 in U.K.

So the ACRM is supportive for us. And also, we hope to see more published papers from the original study sites that has been restarted at -- in Spaulding, Ability and at BU.

And your final question is from the line of Martin (inaudible) with Cantor Holdings.

Just want to ask a few questions here. They're somewhat different, but related to a couple of things that have been happening in the quarter. But among the most important teams, additions to your Board took place in November. You hired what would seem to be a specialist in the whole CMS area, Randel Richner. Can you talk about her and what value does she bring to the Board considering that this is a targeted addition towards what appears will be the most important part of the growth of your business, the emerging U.S. market and obviously getting the coding right. Tell us a little bit about here because I think it seems that this addition is different than what you've had on the Board in the past. That's the first question.

Second one, it seems based on the baseline of your comments already in the fourth quarter, quite a positive surprise. Can you give us a hand of what second half may shape up in terms of the upside beyond even what you would say is your baseline of expectations? Again, I'll go straight to the third question. The share activity and the stock has been very unusual. It seems that the stock has just basically been saying a massive oversupply of shares. There was obviously this offering that came through back in March. Do you think we're almost done with that oversupply? And it seems it's really a matter of not demand -- on the demand side. Stock looks incredibly cheap. And yet, there's consistent selling. What have you heard from H.C. Wainwright? And what do you know about that?

Well, let me answer the first 2, and I'll ask Ori to address the third one. Regarding our Board and our ability to successfully recruit Randel Richner to join us was really a strong belief by everybody on the management team as well as the Board, that the biggest limiter to these innovative technologies has been reimbursement and Randel Richner has extensive experience.

She had headed up all health care policy at Boston Scientific for many years successfully building that program from the ground up. She had subsequently started her own company with expertise in reimbursement, successfully sold that company after it had grown. And then she's been highly involved at the University of Michigan School of Public Health. So her background and knowledge base is high but also particularly important is her personal knowledge and up-to-date interaction with CMS.

She has been quite active with the Medical Device Manufacturers Association, and has helped guide many companies through this pathway. So her joining our Board was a recruiting effort on our part, frankly. I think there's -- she benefit many companies. We're fortunate she joined us. But she's helped us solidify our policy and in the pathways we're pursuing, has been advising us and leading us to the right people to ask questions. So it was a very specific intentional targeted filling of a gap, and we're very happy to have her on the Board.

To your second question, second half, we haven't given a specific forecast at this point. COVID has made the world a little bit too uncertain for that. But we've talked extensively this morning about expecting year-over-year growth as the year progresses. Because there are many patients, whether the ones in the German courts or the VA that we have been -- that are fully qualified that we'd like to move through the system. The cycle time to move those individuals through is about 6 months on average from every successful setup of training, conducting the training and getting the unit. So the growth from those patients will really depend on how open the markets are here in Q2 and in Q3. That will sort of define our calendar year level of success. But we should have a good second half of the year is our expectation. But COVID has had multiple waves. So we have to be a little cautious on that. Ori, do you want to pick up on share activity?

Yes. I can. We don't have insight into the different activities that has been going on as we don't obviously control it. The only thing I will state is that the public domain, maybe you can also take a look. On March 11, we filed an S-1 that was related to the February fundraising. It took an effective -- it took effective by the SEC on March 19. That might have pushed some shareholders that have participated to send some of their shares in the open market, but we don't control that. So I don't have anything to add besides that.

Any other questions for today?

There are no further questions. I will now turn the call back over to Larry.

Okay. Thank you very much for everyone who joined today. We appreciate your time and your interest. Please stay tuned to our upcoming information and publications, and have a good day. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.